PHYSICIAN, SELL THYSELF;DREYER CLINIC, HMO EXPLORE SALE OPTIONS

Dreyer Medical Clinic S.C. and its health maintenance organization are looking for a buyer, adding fresh fuel to a deal-making frenzy in DuPage and Kane counties' health care market.

The group practice and health maintenance organization (HMO), the area's 15th- and 11th-largest, respectively, control a big share of the affluent west suburban health care market, projected to grow by double-digit rates through the end of the decade.

"It's certainly a very attractive profile of patients," says Chicago-based health care consultant Edith L. Johns. "They're employed. There's not a lot of Medicaid out there. And the incomes are good."

Among the suitors for Dreyer are two publicly traded health care giants: Minnesota-based managed care insurer United HealthCare Corp. and Northbrook-based Caremark International Inc., which recently acquired the assets of Dreyer rival Glen Ellyn Clinic (see story on Page 66).

Last week, Dreyer officials confirmed that they've been considering a sale of the medical practice and HMO, either separately or in tandem. Motivated in part by the entry of large national health care players into the western suburbs, Dreyer has engaged the Chicago office of New York-based investment banking firm Dean Witter Reynolds to identify potential buyers.

"Most of the consolidation that's going on on the provider side is to build very large geographic networks that will have negotiating clout with insurance companies," says John W. Potter Jr., president of Dreyer Clinic. "I would say there's not a clinic over 25 physicians that wouldn't be exploring affiliation, or hasn't already committed to one."

In fact, the west suburban area is exploding with merger and acquisition activity. Earlier this year, Aetna Health Plans of the Midwest bought Wheaton Clinic, a large multispecialty group practice. And this month, Caremark concluded a deal for the 100-physician Glen Ellyn Clinic.

In addition, 67 doctors in 20 small physician practices based in Lisle, Elmhurst, Downers Grove, Naperville and Wheaton announced a merger last month to form Oakbrook Terrace-based Mid-America Medical Group S.C.

Dreyer Clinic and its HMO would be a plum for an acquirer. With 104 physicians, the medical practice accounts for 18% of the 563 physicians practicing in Kane County. It reported 398,670 out-patient visits in 1994-the fifth-highest tally in the Chicago area and more than generated by large medical groups linked to major medical centers such as Northwestern Memorial Hospital, Loyola University Medical Center and Rush-Presbyterian-St. Luke's Medical Center.

Dreyer Health Plans is equally desirable.

Last year, the Dreyer HMO had 36,204 members and contracted with 410 physicians, including the clinic's doctors. Premium revenues totaled $58.8 million, and net income was $1.7 million.

Nevertheless, says Mr. Potter, Dreyer needs a well-funded partner to continue to grow in the face of stiffening competition from large national providers and insurers.

"The medical group has opportunities for growth, and that requires capital," says Mr. Potter. "On the health plan side, (Dreyer has) been successful, but they're not metropolitanwide."

Mr. Potter refuses to name potential suitors. But sources close to the negotiations say managed care insurer Aetna has kicked the tires, as have United HealthCare and Caremark. All three declined comment.

Sources say the combined clinic and HMO could fetch up to $110 million.

The price, says Rockford-based HMO consultant William DeMarco, represents a considerable premium based on the fact that the clinic has a captive flow of business from its HMO.

"The HMO license is a conduit to keep the group practice successful," he says.

Dreyer is playing its cards carefully.

"There hasn't been a decision to do something," says Mr. Potter, adding that Dreyer's board will settle on a course of action-which could include remaining independent-by the end of the year.

Noting the area's intense merger and acquisition activity, he concedes that remaining independent "would seem to be against the flow."